I'm wondering if it's possible to have an Ethereum token that is backed by pooled bitcoin (and therefore has 1:1 value parity with Bitcoin) in a trustless way. With tokens issued and destroyed as bitcoin is deposited and removed.
I'm assuming the answer will be no, because the contract would need to be able to issue the private key(s) whenever bitcoin is withdrawn, and that would seem to require a trusted party to provide a key to 'unlock' the contract to do its thing.
But I'm unclear on Ethereum capabilities - maybe the black-box of the contract can 'know' the (hardcoded?) encrypted private key(s), in such a way that it can output a valid, signed bitcoin transaction, only upon contract conditions relating to the contract token being met?
(What I'm really wondering here - is is there a way to subvert the bitcoin scaling issues, by having a trustable, trustless ethereum token, that is almost like a bitcoin sidechain, guaranteed to have 1:1 pegging to bitcoin value, by being provably backed by bitcoin holdings equal to the tokens in circulation.)